RESEARCHERS BECOME ENTREPRENEUR
International benchmark on spin-offs of research centres
For: Dutch Ministry of Economic Affairs
By: J.J.
van Tilburg - Top Spin International April 2003
Summary
Top Spin International conducted an international benchmark of spin-offs from knowledge institutions in autumn 2002 for the Netherlands Ministry of Economic Affairs. The purpose of the study was to find out how Dutch public knowledge institutions - universities and research institutes - are handling the commercialisation of knowledge through spin-offs. The study embraced 14 universities and 15 research institutes in the
Netherlands. The Dutch situation was put into an international perspective by benchmarking against spin-off practices at seven foreign universities and against national spin-off policy in other countries. The countries where the international research was conducted were Belgium, Denmark, Germany, Finland, France, the United Kingdom and United States of America. Several respondents were contacted at each knowledge institution so as to examine the subject from various angles both at policy level and at operational level. Besides the 101 employees of the knowledge institutions, the researchers brought outsiders into the study in order to obtain the most objective picture possible. The outsiders were 26 spin-off entrepreneurs and 27 representatives of regional development agencies. A total of 153 respondents took part in the study. The results were approved by the knowledge institutions on completion of the study. Spin-off policy
A majority of the knowledge institutions considered it important to stimulate spin-offs, i.e. 60% of the research institutes, 71% of the Dutch universities and 85% of the interviewed foreign universities. Only 17% of the Dutch knowledge institutions considered it entirely unimportant to stimulate spin-offs. The importance attached to spin-offs was reflected by the volume of activities organised to stimulate them. Most of these activities were undertaken at universities, i.e. two or three times as many as at research institutes. The most frequently occurring activities to stimulate spin-offs were:
· provision of support through management advice;
· contacts through networks of entrepreneurs;
· availability of incubator accommodation;
· utilisation of patents and licences;
· use of technical facilities.
Spin-off policy was found to be evolving, with work is in progress at 52% of the Dutch knowledge institutions on plans for new activities to support spin-offs. The most important new activities concerned:
· development of a science park;
· tracing of inventions with spin-off potential.
An important conclusion is that knowledge institutions are grappling with the continuity of their spin-off stimulation activities. Important internal factors that support continuity are:
· champions, or people in key positions who promote a particular spin-off;
· policy-driven and organisational embedding, for example through inclusion of spin-off promotion in an institution’s policy or the setting up of a holding company construction.
An external factor is that the legal definition of the tasks of universities in the
Netherlands is not very clear when it comes to commercialising knowledge. It is not explicitly prohibited, but on the other hand it is not encouraged in any way whatsoever. Reasons for promoting spin-offs
Numerous reasons were cited for stimulating spin-offs. The most important were:
· reinforcement of relations with the business community;
· improvement of the career prospects of employees;
· strengthening of the image of the knowledge institution;
· fulfilment of the mission of commitment to society;
· enlargement of the third cash flow;
· strengthening of the institution's own research.
Disadvantages of promoting spin-offs were also mentioned. The most important were:
· the financial and legal risks;
· spin-offs are at the expense of attention to the primary activities of education and research;
· a lack of the expertise and time required to stimulate spin-offs;
· loss of good employees.
When the benefits and costs are set against each other, the balance is positive for most of the knowledge institutions (72%).
Number of spin-offs
The number of spin-offs initiated yearly at the 29 knowledge institutions is estimated at 107. The average at the Dutch universities is 6.4 spin-offs per year, at the research institutions 1.3 and at the seven examined foreign universities 7.1. The average spin-off index for the Dutch knowledge institutions is 1.88, representing the annual number of spin-offs per 1000 employees.
In most cases the number of spin-offs is not systematically recorded. Therefore, the numbers stated in this summary are estimates. The actual number of spin-offs is likely to be a few dozen percent higher.
Universities with a high spin-off index are located outside the Randstad (the highly urbanised western part of the
Netherlands) and they play an important role in regional economic development. The foreign universities with a high spin-off index were found in countries with the most explicit spin-off policy: the United Kingdom, France, Germany and Belgium (regional approach). Characteristics of spin-offs
The modal spin-off entrepreneur is a researcher who works at a knowledge institution but wants to set up his own business. He/she wants to take on the challenge of commercialising his/her technological invention. This man/woman does not possess entrepreneurial qualities and is unfamiliar with starting up a company. Therefore, he/she makes grateful use of support in the form of accommodation and also uses the technical facilities of the knowledge institution. Additionally, he/she takes advantage of the offered management advice on marketing and financing. Talks are held about the possibilities to obtain a licence and participation of the knowledge institution in the share capital of the spin-off company.
Support of spin-offs
The spin-off support given by the knowledge institutions received a mark of 7- from most respondents at the Dutch and foreign universities and a mark of 6+ from respondents at the research institutes. The most important support activities mentioned by spin-off entrepreneurs were use of the research facilities of the knowledge institutions and the received technical and management advice. Approximately half of all knowledge institutions participated in spin-offs. Some had set up a separate holding organisation for that purpose while others do this via a participating enterprise. The most frequently occurring type of financial support was the provision of an interest-free loan to the spin-off entrepreneurs. This was found to be the case at 71% of the examined foreign universities, 50% of the Dutch universities and 13% of the research institutes. A licensing agreement was concluded at 47% of the research institutes, 72% of the Dutch universities and 86% of the examined foreign universities. The transfer of patents occurs relatively more frequently at universities (70%) and less at the research institutes (13%). Support of spin-offs by offering accommodation within the establishment’s own buildings occurs frequently at 43% of the Dutch universities and at 71% of the foreign universities. It happens occasionally at the other knowledge institutions while 25% of the Dutch knowledge institutions never offer their own accommodation to spin-offs. Another form of spin-off accommodation in the immediate vicinity of the knowledge institutions is an incubator building where office services and management support are offered in addition to space. Incubators were available at 53% of the research institutes, 79% of the Dutch universities and 86% of the foreign universities. A total of between 25 and 30 incubators were traced in the
Netherlands. Several incubators are available at some knowledge institutions. A sharp dividing line was not drawn between incubators and shared business premises. All Dutch universities are involved financially or organisationally in the "incubator". This occurs at only half of the other knowledge institutions. Most universities (71%) and half the research institutes (43%) are located in or near a science park. A science park was the most frequently mentioned spin-off stimulation activity under development. The conclusion is that spin-off support could be better. Important pointers for improvement are the barriers and bottlenecks that knowledge institutions face when promoting spin-offs, namely:
· availability of limited financial resources to stimulate spin-offs;
· a field of tension between the officially assigned task and the commercialisation of knowledge;
· limited support for stimulating spin-offs because of the absence of an entrepreneurial culture;
· insufficient availability of expertise within the knowledge institutions for supporting spin-offs;
· insufficient physical space, facilities and manpower at knowledge institutions for stimulating spin-offs.
Differences between universities and research institutions do not provide a reason for adopting separate approaches towards spin-offs.
Best practice
All universities and most research institutes (80%) were familiar with inspirational examples of spin-offs elsewhere. The following Dutch universities got remarkably high scores: the Universities of Twente,
Maastricht and Leiden and also TNO. High-scoring foreign knowledge institutions were the Universities of Leuven, Stanford, Cambridge and the MIT and also the Fraunhofer Institute. A total of 25 spin-off stimulation activities emerged as best practice or field cases. Of these, nine came from Dutch universities, four from Dutch research institutes and 12 from foreign knowledge institutions. Environment
The climate for starting entrepreneurs at the knowledge institutions was experienced as being more stimulating than the general starters' climate in the
Netherlands. At the examined universities in the Netherlands and abroad, 60% of the respondents said there was a stimulating climate for starters, and the figure at the research institutes was 27%. Dutch universities in particular observed the existence of obstructive legislation (79%) and to a slightly lesser extent this was also the case at the seven foreign universities (57%) and the research institutes (47%). The bottlenecks in laws and regulations concerned mainly the official task assigned to the knowledge institutions, financing and regulations governing intellectual property rights. Putting themselves in the shoes of the Minister of Economic Affairs or the Minister of Education, Culture and Science, the 116 respondents together made 196 policy recommendations for promoting spin-offs. The most important recommendations concerned:
· greater financial resources for start-up capital and the continuity of spin-off programmes;
· better use of financial resources by devoting attention to flying starters;
· better supply of information and the professionalisation of spin-off support;
· improvements to laws and regulations and removal of fiscal barriers.
A large proportion of the universities (79%) and a small proportion of the research institutes (27%) co-operated with external organisations in the promotion of spin-offs. The most important partners were companies and regional development agencies. Co-operation with the business community included networking, consultancy and joint spin-off projects. At the seven foreign universities, participating enterprises played a relatively more important role than in the
Netherlands. The actual spin-offs were found not to yield any money for the knowledge institutions. There was the occasional windfall through the sale of shares, as in the case of Crucell at the
University of Utrecht. Therefore, other sources will need to be tapped for the financing of spin-off programmes. Spin-off policy of central governments
A spin-off policy was not found to exist in any of the examined countries. The most explicit spin-off policy was observed in the
United Kingdom, France and Germany. In most cases, spin-off policy forms part of innovation, fiscal or starters policy. A regional component of spin-off policy was observed especially in Belgium and to some extent also in the Netherlands. No specific spin-off legislation was found. In France, however, an "Innovation and Research Act" introduced in 1999 makes it easier for researchers to participate in spin-offs. It is estimated that this has produced a fivefold increase in the number of spin-offs. A total of 21 spin-off measures were observed in the various countries. No drastic policy changes are expected in most of the countries with regard to spin-off policy. However, the United Kingdom is about to embark on a large-scale reorganisation of support for the business community and the promotion of spin-offs is one of the matters receiving attention. In a number of countries, there will be a heavy emphasis on commercialising knowledge in the coming years. The official definitions of tasks assigned to universities in Belgium and Germany make explicit mention of technology transfer and of the commercialisation of knowledge. Laws in other countries ( Denmark and Finland) do not explicitly contain such references. The tasks of universities in the United States are not regulated by law but in mission statements formulated by the universities. Policy on intellectual property rights has undergone major change in recent years. The general tendency is for knowledge institutions to own the intellectual property rights attached to inventions. Only in Finland does this right still rest with the researchers. Regulations concerning entrepreneurial activities of university staff cover the stimulation of the mobility of researchers, incubators and financial support for the spin-offs. Recommendations
The findings of the research lead to numerous recommendations for central government and also for the knowledge institutions and other stakeholders. The main recommendations for the Dutch central government are:
· introduce in the short term substantial and integral support for spin-off programmes based on a bottom-up approach. Amend the SIT regulations to create a better alignment to the specific situations existing at the knowledge institutions. Take the German Exist programme as an example for an integral bottom-up approach;
· provide an unambiguous official definition of the task of knowledge institutions, one that includes the promotion of spin-offs and gives it a place in the model for allocating resources;
· contribute to the financing of spin-offs, the continuity of spin-off programmes and the infrastructure for spin-offs;
· promote the professionalisation of spin-off support and efficient networks for harmonisation between authorities, knowledge institutions and companies.
Recommendations for knowledge institutions
· embed spin-off policy in the institution’s strategy, organisational structure, regulations and culture;
· encourage entrepreneurship among staff and in education;
· professionalise spin-off support with primary areas of attention being intellectual property rights and participating interests and identify current spin-offs.
Recommendations for other organisations
· develop possibilities for co-operation in spin-offs between knowledge institutions, companies, service providers and local authorities;
· link private spin-off potential to the public knowledge institutions.
Recommendations for further research:
· create legal and fiscal possibilities for promoting spin-offs;
· identify spin-offs from other knowledge institutions like teaching hospitals and private R&D laboratories;
· monitor regularly the emergence of new entrepreneurship that buds from Dutch knowledge institutions;
· conduct qualitative and quantitative stocktaking research into incubators and science parks.
Final word
A conclusion that may be drawn is that great potential exists at the Dutch knowledge institutions for creating numerous new spin-off companies. There is already a reasonably large degree of commitment in the research community for stimulating spin-off companies. A joint approach together with national and regional governments and with the business community will undoubtedly lead to a further increase in the quality and quantity of spin-offs from Dutch knowledge institutions. Intensification of this effort is also important in an international context because the
Netherlands is definitely not a frontrunner when it comes to promoting the commercialisation of knowledge through spin-offs. Therefore, it is important for the recommendations ensuing from the research not to fall by the wayside on the slippery road between the ivory tower of academic freedom and the golden calf of freedom of entrepreneurship. A joint intensification of spin-off policy is likely to lead in the short term to a substantial strengthening of the Dutch economy on the one hand and improvement of the competitive position of the Dutch knowledge institutions on the other.